I'm valuing EVS based on its potential, like most penny dreadful / microcap stocks. You're not paying for profits that are there today - this isn't a blue chip stock - you're paying for the possibility of profits at some point in the future.
In my mind, a enterprise wide deal with a major, large scale client like Thames Water could easily add $5m to $10m to sales by itself. Because they're selling software, I expect additional sales to be mostly fall straight to the bottom line and be pure profit. Apply a multiple to this profit, and you have a multiple of today's market cap of $8.5M. It doesn't necessarily have to be Thames Water. I note that a middle eastern government is currently trialing their software. A multi-million dollar sale as a result of the trial doesn't seem inconceivable to me.
Make no mistake - EVS is a high risk stock. Most penny dreadfuls fail to reach their lofty ambitions and result in virtually complete wipeouts for shareholders. But that doesn't mean they're worthless either. You can think of it as a lottery ticket I suppose. Small chance of success, but big rewards if it happens.
EVS Price at posting:
3.7¢ Sentiment: Hold Disclosure: Held
